Law of Supply & Demand Flashcards
It is when the price goes up, then the demand goes down.
Demand / Law of Demand
What are the 3 Reasons for the Law of Demand?
Substitution Effect
Income Effect - Purchase Power
Law of Diminishing Marginal Utility - Law of Decreasing Additional Satisfaction
It is one of the shifters of Demand where the positive effect placed on the right curve, then negative effect is placed in left curve.
Taste and Preferences
This shifters of Demand contains substitute and compliment. For example, a Substitute for Magnolia Fresh Milk are the Alaska, Cowhead, Nestle etc. The Compliment for example, where you have a hotdog and you’ll buy other related goods to complete the preferred product, such as, buns, mayonnaise, catsup, and mustard.
Price of Related Goods
It talks about income wherein this type of goods means that if the income increases, then the demand also increases. For example, Appliances, Ham, etc.
Normal Goods
It is the goods where the income increases, but the demand decreases. For example, Instant noodles, smoked fish (tuyo, tinapa) etc.
Inferior Goods
It is where the consumers either panic buying or postponing the buy of goods.
Expectations
What are the 5 Shifters of Demand?
- Taste and Preferences
- Number of Consumers
- Price of Related Goods
- Income
- Expectations (Consumers)
What it is wherein the price will increases, then quantity supply will also increases which has the direct relationship.
Supply / Law of Supply
It is where the consumer side and has the Downward Scoping Curve.
Demand
It is the motivator for the supplier to produce more, it also maximize profit and is Upward Sloping Curve.
Price / Price of Supply
It refers to the raw materials used in the production of goods. For example, bread it has the raw materials which are the flour, sugar, salt, oil, eggs, and butter.
Price or Resource
What are the 5 Shifters of Supply?
- Price or Resource
- Number of Products
- Technology
- Taxes and Subsidies
- Expectations (Producers)
